An Analysis of Anomalies Split To Examine Efficiency in the Saudi Arabia Stock Market

An Analysis of Anomalies Split To Examine Efficiency in the Saudi Arabia Stock Market Mohammed A. Hokroh MBA (Finance), University of Leicester, Business System Analyst Phone: +966 0568570987 E-mail: Mohammed.Hokroh@Gmail.com Received: June 05, 2013 Accepted: June 18, 2013 DOI: 10.5296/ijafr.v3i1.3850 Abstract This research continues the investigation of Hokroh (2013) whose work examined the Saudi Stock Market (SSM) efficiency before and after the formation of Tadawul Company (the entity responsible for operating the SSM). The SSM stock price returns index before Tadawul (January 1 st 2007 to March 18 th 2007) and after Tadawul (March 19 th 2007 to May 29 th 2007) in addition to 52 days split of returns from 5/30/2007 to 11/11/2008 were examined to test if anomalies split assumption holds over time. The data was analyzed using: regression, abnormal returns calculation, T-statics test and correlation. The results indicate that the SSM has become informationally more efficient after the formation of Tadawul and that the SSM adjust slowly to market information. Keywords: Auditing, Job satisfaction, Gender, Job attitude 268

1. Introduction A. The Saudi Stock Market: The Saudi Stock Market (SSM) has history full of changes, restructure and development. Since its establishment in 1934, it has gone through various regulatory changes and emerged gradually until today. (Hokroh 2013) The SSM has attracted researchers to investigate its efficiency. Building on Fama efficiency theory, scholars used different techniques and test statistics to examine the efficiency assumption. However, the event study techniques have never been attempted so far. I am not aware of any research used the event study methods to test for the SSM efficiency. B. Event Studies: The development work of this research is influenced by Fama (1998) who pointed out that when scholars try to examine market efficiency through testing price returns for a long period of time, they are faced with a dilemma. The dilemma is that most of the correlation and run-tests will conclude inefficiency. Fama pointed out that this is not a valid conclusion and recommended event studies as alternative methodology. Event studies are statistical tools and techniques that are used to measure stock prices reaction to market events and news. Fama (1998) point out that if an even anomalies split between underreaction and overreaction can be observed, then they cannot be attributed to chance and are consistent with the efficiency theory. C. Continue of Hokroh (2013) Work: This research continues the investigation of Hokroh (2013) whose work examined the SSM efficiency before and after the introduction of Tadawul Company (the entity responsible for operating the SSM) but could not confirm if the SSM has become efficient or not. Hokroh (2013) advised more work to be done on the subject. His recommendations are discussed in the literature review section. 2. Literature review D. Previous work: There have been few studies that discussed the efficiency theory in the SSM (Butler et.al. 1992, Al-Razeen 1997, Khababa 1998, Onour 2004, Al- Abdulqader et.al. 2007, Hokroh 2013) but produced varying conclusions. Most of the studies conducted on the SSM efficiency have analyzed different samples taken from different periods of a market that has gone through various reformations (Hokroh 2013). For more details on previous work refer to Hokroh (2013). Previous work, except Hokroh (2013), was done before the emergence of the Tadawul Company which is considered the most major recent market restructure. Hokroh (2013) study tested the SSM efficiency before and after Tadawul and could not confirm if the SSM has improved after Tadawul formation. Hokroh (2013) performed two statistical techniques (autocorrelation and run-test) on the SSM index from January 1 st 2007 to March 18 th 2007 (before Tadawul) and from March 19 th 2007 to May 29 th 2007 (after Tadawul). The results showed efficiency improvement after Tadawul. However, this efficiency improvement has 269

significantly overturned as time passes. A growing literature relates this phenomenon to market slow adjustment to information but Fama challenges this inference (Hokroh 2013). For long term returns, Fama (1998) point out that if an even anomalies split between underreaction and overreaction can be observed, then they cannot be attributed to chance and are consistent with the efficiency theory. The analysis of anomalies split between underreaction and overreaction has never been attempt in previous work on the SSM. Hokroh (2013) recommended that further research should consider analysis underreaction and overreaction split before and after Tadawul to examine efficiency. Accordingly, this research will take a further step to investigate Fama s argument, based on Hokroh (2013) work, and will examine the SSM efficiency before and after Tadawul. The data collected in Hokroh (2013) will be analyzed to identify anomalies split. This research will examine the anomalies split through four main steps: 1) regression, 2) calculating abnormal returns, 3) T-statics test and 4) correlation. The data collection process and analysis approach is shown in details in the methodology section. 3. Methodology A. Data Collection: The empirical work of this research is based on Hokroh (2013). The SSM stock price returns before Tadawul (January 1 st 2007 to March 18 th 2007) and after Tadawul (March 19 th 2007 to May 29 th 2007) were examined (52 days before Tadawul and 52 days After Tadawul). Furthermore, another 52 days split of returns data from 5/30/2007 to 11/11/2008 were also examined to test if anomalies split assumption holds over time. Accordingly, the collected data (returns) were divided into 9 periods (data sets) with 52 days for each period. The total number of observation captured was 468 observations. The SSM daily stock price returns index included all the daily closing price for all shares traded from 11:00 a.m. to 3:30 p.m. (Hokroh 2013). All data was collected from the Tadawul Company s website (http://www.tadawul.com.sa) using the websites historical database search engine (Hokroh 2013). B. Expected Returns: The first step, after the data collection, was to get the respective expected return for each actual return using liner regression equations. The assumption of the regression equations is that the expected returns will not significantly change before and after Tadawul. Thus, the price returns after Tadawul (dependent variable) will be based on price returns before Tadawul (independent Variable) and vise-versa. The regression equations are shown in table 1 and 2. 270

Coefficients a Unstandardized Coefficients Standardized Coefficients Model B Std. Error Beta t Sig. 1 (Constant) 9606.956 1723.184 5.575.000 Actual return (after Tadawaul) -.230.222 -.145-1.036.305 a. Dependent Variable: Actual return (before Tadawaul) Expected Return before Tadawul = 9606.956-.230 (Actual return (beforetadawaul)) Table 1: Expected returns before Tadawul Coefficients a Unstandardized Coefficients Standardized Coefficients Model B Std. Error Beta t Sig. 1 (Constant) 8459.986 692.204 12.222.000 Actual return (before Tadawaul) -.091.088 -.145-1.036.305 a. Dependent Variable: Actual return (after Tadawaul) Expected Return after Tadawul = 8459.986 -.091 (Actual return (after Tadawaul)) Table 2: Expected returns after Tadawul The regression equations were applied on the SSM daily stock price returns to get their respective expected returns. The expected returns were computed for each of the 9 periods of the data sets. The regression equation outcomes are illustrated in tables 3 and 4. C. Abnormal Returns: After getting the respective expected returns, I calculated the abnormal returns. The abnormal returns are defined as the difference between the actual and expected returns. They can be computed using the below formula: Abnormal Return = Actual Return Expected Return The results of the computation are shown in tables 3 and 4. D. T-Statistics: The t-statistics was applied on the Delta ( ) of each period of the 9 data sets. The t-test will be used to examine if there is a significant difference between the mean of the Deltas ( ) of each data set. Thus, two hypotheses are derived: H 0 =0 (there is no difference between the means of each data set) H 1 0 (there is a difference between the means of each data set) 271

E. Correlation: The final step in my examination was to test the correlation between Delta ( ) values of each data set to see if a trend can be drawn. This further step was taken to examine if the SSM participants react slowly to market information or is it only the split assumption that is valid. H 0 =0 (there is no sequence in Delta ( ) values) H 1 0 (there is a sequence in Delta ( ) values) 4. Results and Findings: A. Regression Equations Results: The regression equations outcome is detailed in table 3 and 4. 272

3/10/2007 8978.26 7541.9562 1436.3038 5/21/2007 7770.51 7752.87 17.64 8/1/2007 7472.07 7780.03-307.96 10/22/2007 8043.44 7728.03 315.41 1/8/2008 11436.28 7419.28 4017 3/11/2007 8767.42 7590.4494 1176.9706 5/22/2007 7777.1 7752.27 24.83 8/4/2007 7479.89 7779.32-299.43 10/23/2007 8038.93 7728.44 310.49 1/9/2008 11486.84 7414.68 4072.16 3/12/2007 8867.65 7567.3965 1300.2535 5/23/2007 7719.95 7757.47-37.52 8/5/2007 7518.08 7775.84-257.76 10/24/2007 8083.46 7724.39 359.07 1/12/2008 11697.01 7395.56 4301.45 3/13/2007 8565.11 7636.9807 928.1293 5/26/2007 7784.72 7751.58 33.14 8/6/2007 7578.31 7770.36-192.05 10/27/2007 8242.32 7709.93 532.39 1/13/2008 11566.9 7407.4 4159.5 3/14/2007 8717.75 7601.8735 1115.8765 5/27/2007 7703.87 7758.93-55.06 8/7/2007 7653.84 7763.49-109.65 10/28/2007 8246.07 7709.59 536.48 1/14/2008 11600.68 7404.32 4196.36 3/17/2007 8766.55 7590.6495 1175.9005 5/28/2007 7632.98 7765.38-132.4 8/8/2007 7637.79 7764.95-127.16 10/29/2007 8370.18 7698.3 671.88 1/15/2008 11597.01 7404.66 4192.35 3/18/2007 8869.17 7567.0469 1302.1231 5/29/2007 7428.37 7784-355.63 8/11/2007 7640.49 7764.7-124.21 10/30/2007 8326.87 7702.24 624.63 1/16/2008 11338.64 7428.17 3910.47 Total 406853.19 405985.4783 867.7117 Total 402760.92 403268.04-507.12 Total 379313.45 405401.73-26088.28 Total 411617.05 402462.11 9154.94 Total 526786.36 391981.72 134804.64 3/3/2007 8482.26 7656.0362 826.2238 5/14/2007 7591.97 7769.12-177.15 7/25/2007 7545.52 7773.34-227.82 10/8/2007 7687.37 7760.44-73.07 1/1/2008 10717.89 7484.66 3233.23 3/4/2007 8714.97 7602.5129 1112.4571 5/15/2007 7621.27 7766.45-145.18 7/28/2007 7479.47 7779.35-299.88 10/9/2007 7724.57 7757.05-32.48 1/2/2008 10721.61 7484.32 3237.29 3/5/2007 8827.09 7576.7253 1250.3647 5/16/2007 7594.34 7768.9-174.56 7/29/2007 7533.41 7774.45-241.04 10/10/2007 7806.53 7749.59 56.94 1/5/2008 11259.65 7435.36 3824.29 3/6/2007 8805.75 7581.6335 1224.1165 5/19/2007 7680.07 7761.1-81.03 7/30/2007 7468.3 7780.37-312.07 10/20/2007 7999.18 7732.06 267.12 1/6/2008 11499.4 7413.54 4085.86 3/7/2007 8884.93 7563.4221 1321.5079 5/20/2007 7735.6 7756.05-20.45 7/31/2007 7475.35 7779.73-304.38 10/21/2007 7977.38 7734.04 243.34 1/7/2008 11500.9 7413.4 4087.5 2/10/2007 7350.68 7916.2996-565.6196 4/23/2007 7279.11 7797.59-518.48 7/4/2007 7141.55 7810.1-668.55 9/16/2007 7756.49 7754.15 2.34 12/5/2007 9757.58 7572.05 2185.53 2/11/2007 7418.38 7900.7286-482.3486 4/24/2007 7215.32 7803.39-588.07 7/7/2007 7297.79 7795.89-498.1 9/17/2007 7807.95 7749.46 58.49 12/8/2007 9946.6 7554.85 2391.75 2/12/2007 7479.59 7886.6503-407.0603 4/25/2007 7287.11 7796.86-509.75 7/8/2007 7307.07 7795.04-487.97 9/18/2007 7834.93 7747.01 87.92 12/9/2007 9871.76 7561.66 2310.1 2/13/2007 7625.27 7853.1439-227.8739 4/28/2007 7501.43 7777.36-275.93 7/9/2007 7298.04 7795.86-497.82 9/19/2007 7851.76 7745.48 106.28 12/10/2007 10136.62 7537.55 2599.07 2/14/2007 7850.45 7801.3525 49.0975 4/29/2007 7416.86 7785.05-368.19 7/10/2007 7268.26 7798.57-530.31 9/22/2007 7846.8 7745.93 100.87 12/11/2007 10628.06 7492.83 3135.23 2/17/2007 8036.91 7758.4667 278.4433 4/30/2007 7478.11 7779.48-301.37 7/11/2007 7404.08 7786.21-382.13 9/24/2007 7826.19 7747.8 78.39 12/12/2007 10911.94 7467 3444.94 2/18/2007 8062.82 7752.5074 310.3126 5/1/2007 7620.82 7766.49-145.67 7/14/2007 7502.3 7777.28-274.98 9/25/2007 7880.83 7742.83 138 12/15/2007 10823.76 7475.02 3348.74 2/19/2007 8196.28 7721.8116 474.4684 5/2/2007 7588.48 7769.43-180.95 7/15/2007 7420.65 7784.71-364.06 9/26/2007 7904.6 7740.67 163.93 12/16/2007 10957.43 7462.86 3494.57 2/20/2007 8152.73 7731.8281 420.9019 5/5/2007 7393.43 7787.18-393.75 7/16/2007 7405.85 7786.05-380.2 9/29/2007 7844.65 7746.12 98.53 12/17/2007 11254.38 7435.84 3818.54 2/21/2007 8294.16 7699.2992 594.8608 5/6/2007 7389.25 7787.56-398.31 7/17/2007 7377.67 7788.62-410.95 9/30/2007 7813.12 7748.99 64.13 12/24/2007 11492.1 7414.2 4077.9 2/24/2007 8369.6 7681.948 687.652 5/7/2007 7390.71 7787.43-396.72 7/18/2007 7401.88 7786.41-384.53 10/1/2007 7819.15 7748.44 70.71 12/25/2007 11272.43 7434.19 3838.24 2/25/2007 8443.47 7664.9579 778.5121 5/8/2007 7465.28 7780.65-315.37 7/21/2007 7441.8 7782.78-340.98 10/2/2007 7794.32 7750.7 43.62 12/26/2007 11252.77 7435.98 3816.79 2/26/2007 8429.13 7668.2561 760.8739 5/9/2007 7443.78 7782.6-338.82 7/22/2007 7376.92 7788.69-411.77 10/3/2007 7704.58 7758.87-54.29 12/29/2007 11263.61 7435 3828.61 2/27/2007 8395.62 7675.9634 719.6566 5/12/2007 7435.14 7783.39-348.25 7/23/2007 7336.94 7792.32-455.38 10/6/2007 7632.84 7765.4-132.56 12/30/2007 11093.29 7450.5 3642.79 2/28/2007 8279.03 7702.7791 576.2509 5/13/2007 7517.15 7775.93-258.78 7/24/2007 7482.13 7779.11-296.98 10/7/2007 7666.26 7762.36-96.1 12/31/2007 11038.66 7455.47 3583.19 273 1/31/2007 7055.69 7984.1473-928.4573 4/15/2007 7401.19 7786.48-385.29 6/26/2007 7092.42 7814.58-722.16 9/8/2007 7936.87 7737.73 199.14 11/27/2007 9271.54 7616.28 1655.26 2/3/2007 7239.77 7941.8089-702.0389 4/16/2007 7497.31 7777.73-280.42 6/27/2007 6999.7 7823.01-823.31 9/9/2007 7887.23 7742.25 144.98 11/28/2007 9389.71 7605.52 1784.19 2/4/2007 7173.47 7957.0579-783.5879 4/17/2007 7409.87 7785.69-375.82 6/30/2007 6973.57 7825.39-851.82 9/10/2007 7922.18 7739.07 183.11 12/1/2007 9411.08 7603.58 1807.5 2/5/2007 7128.76 7967.3412-838.5812 4/18/2007 7511.3 7776.46-265.16 7/1/2007 6901.66 7831.93-930.27 9/11/2007 7778.96 7752.1 26.86 12/2/2007 9433.12 7601.57 1831.55 2/6/2007 7259.35 7937.3055-677.9555 4/21/2007 7379.45 7788.46-409.01 7/2/2007 6944.49 7828.04-883.55 9/12/2007 7788.11 7751.27 36.84 12/3/2007 9582.21 7588 1994.21 2/7/2007 7326.88 7921.7736-594.8936 4/22/2007 7256.48 7799.65-543.17 7/3/2007 6969.54 7825.76-856.22 9/15/2007 7798.97 7750.28 48.69 12/4/2007 9653.98 7581.47 2072.51 1/20/2007 7146.14 7963.3438-817.2038 4/2/2007 7672.42 7761.8-89.38 6/13/2007 7079.19 7815.78-736.59 8/26/2007 8055.21 7726.96 328.25 11/14/2007 9080.1 7633.7 1446.4 1/21/2007 7191.15 7952.9915-761.8415 4/3/2007 7663.38 7762.62-99.24 6/16/2007 6876.92 7834.19-957.27 8/27/2007 8054.31 7727.04 327.27 11/17/2007 9055.53 7635.93 1419.6 1/22/2007 7268.27 7935.2539-666.9839 4/4/2007 7715.84 7757.84-42 6/17/2007 6901.72 7831.93-930.21 8/28/2007 8109.59 7722.01 387.58 11/18/2007 9003.81 7640.64 1363.17 1/23/2007 7141.73 7964.3581-822.6281 4/7/2007 8140.21 7719.23 420.98 6/18/2007 6896.35 7832.42-936.07 8/29/2007 8188.53 7714.83 473.7 11/19/2007 9138.3 7628.4 1509.9 1/24/2007 6936.33 8011.6001-1075.2701 4/8/2007 8045.67 7727.83 317.84 6/19/2007 6926.9 7829.64-902.74 9/1/2007 8006.51 7731.39 275.12 11/20/2007 9299.61 7613.72 1685.89 1/27/2007 6911.58 8017.2926-1105.7126 4/9/2007 7936.57 7737.76 198.81 6/20/2007 7002.53 7822.76-820.23 9/2/2007 7938.87 7737.55 201.32 11/21/2007 9406.59 7603.99 1802.6 1/28/2007 6982.21 8001.0477-1018.8377 4/10/2007 7955.36 7736.05 219.31 6/23/2007 6990.84 7823.82-832.98 9/3/2007 7974.18 7734.34 239.84 11/24/2007 9525 7593.21 1931.79 1/29/2007 6905.56 8018.6772-1113.1172 4/11/2007 7848.16 7745.8 102.36 6/24/2007 7112.99 7812.7-699.71 9/4/2007 7833.43 7747.14 86.29 11/25/2007 9540.55 7591.8 1948.75 1/30/2007 6956.58 8006.9426-1050.3626 4/14/2007 7639.31 7764.81-125.5 6/25/2007 7088.71 7814.91-726.2 9/5/2007 7814.49 7748.87 65.62 11/26/2007 9465.7 7598.61 1867.09 Date Actual Expected Date Actual Expected Date Actual Expected Date Actual Expected Date Actual Expected 1/6/2007 7967.7 7774.385 193.315 3/19/2007 8933.37 7647.05 1286.32 5/30/2007 7502.02 7777.3-275.28 8/12/2007 7732.83 7756.3-23.47 10/31/2007 8478.99 7688.4 790.59 1/7/2007 7753.96 7823.5452-69.5852 3/20/2007 8916.79 7648.56 1268.23 6/2/2007 7357.65 7790.44-432.79 8/13/2007 7842.1 7746.35 95.75 11/3/2007 8682.68 7669.86 1012.82 1/8/2007 7732.97 7828.3729-95.4029 3/21/2007 8873.96 7652.46 1221.5 6/3/2007 7462.1 7780.93-318.83 8/14/2007 7910.56 7740.13 170.43 11/4/2007 8719.51 7666.51 1053 1/9/2007 7729.91 7829.0767-99.1667 3/24/2007 8739.47 7664.69 1074.78 6/4/2007 7383.2 7788.11-404.91 8/15/2007 7840.41 7746.51 93.9 11/5/2007 8732.6 7665.32 1067.28 1/10/2007 7586.61 7862.0357-275.4257 3/25/2007 8751.12 7663.63 1087.49 6/5/2007 7368.66 7789.44-420.78 8/18/2007 7802.13 7749.99 52.14 11/6/2007 8889.89 7651.01 1238.88 1/13/2007 7230.09 7944.0353-713.9453 3/26/2007 8242 7709.96 532.04 6/6/2007 7380.04 7788.4-408.36 8/19/2007 7938.44 7737.59 200.85 11/7/2007 8933.95 7647 1286.95 1/14/2007 7069.21 7981.0377-911.8277 3/27/2007 8126.48 7720.48 406 6/9/2007 7431.29 7783.74-352.45 8/20/2007 7951.14 7736.43 214.71 11/10/2007 8941.95 7646.27 1295.68 1/15/2007 7250.49 7939.3433-688.8533 3/28/2007 7997.49 7732.21 265.28 6/10/2007 7442.29 7782.74-340.45 8/21/2007 7965.53 7735.12 230.41 11/11/2007 8937.36 7646.69 1290.67 1/16/2007 7123.88 7968.4636-844.5836 3/31/2007 7731.62 7756.41-24.79 6/11/2007 7209.02 7803.97-594.95 8/22/2007 8004.05 7731.62 272.43 11/12/2007 9003 7640.71 1362.29 1/17/2007 7153.87 7961.5659-807.6959 4/1/2007 7913.37 7739.87 173.5 6/12/2007 7074.2 7816.23-742.03 8/25/2007 8011.65 7730.93 280.72 11/13/2007 9085.8 7633.18 1452.62 Before Tadawul After Tadawul P1 (1/6/2007-3/18/2007) P2 (3/19/2007-5/29/2007) P3 (5/30/2007-8/11/2007) P4 (8/12/2007-10/30/2007) P5 (10/31/2007-1/16/2008)

3/10/2008 9600.38 7586.35 2014.03 5/21/2008 9672.62 7579.78 2092.84 8/3/2008 8627.24 7674.91 952.33 10/22/2008 6160.8 7899.35-1738.55 3/11/2008 9733.94 7574.2 2159.74 5/24/2008 9665.78 7580.4 2085.38 8/4/2008 8469.77 7689.24 780.53 10/25/2008 5624.68 7948.14-2323.46 3/12/2008 9735.98 7574.01 2161.97 5/25/2008 9715.31 7575.89 2139.42 8/5/2008 8502.2 7686.29 815.91 10/26/2008 5531.57 7956.61-2425.04 3/15/2008 9548.06 7591.11 1956.95 5/26/2008 9553.26 7590.64 1962.62 8/6/2008 8451.06 7690.94 760.12 10/27/2008 5338.68 7974.17-2635.49 3/16/2008 9515.3 7594.09 1921.21 5/27/2008 9482.25 7597.1 1885.15 8/9/2008 8173.97 7716.15 457.82 10/28/2008 5621.99 7948.38-2326.39 3/17/2008 9318.59 7611.99 1706.6 5/28/2008 9491.31 7596.28 1895.03 8/10/2008 7884.14 7742.53 141.61 10/29/2008 5537.82 7956.04-2418.22 3/18/2008 9393.12 7605.21 1787.91 5/31/2008 9529.34 7592.82 1936.52 8/11/2008 8067.62 7725.83 341.79 11/1/2008 5871.24 7925.7-2054.46 3/19/2008 9344.43 7609.64 1734.79 6/1/2008 9503.28 7595.19 1908.09 8/12/2008 8165.42 7716.93 448.49 11/2/2008 5800.9 7932.1-2131.2 3/22/2008 9259.54 7617.37 1642.17 6/2/2008 9516.57 7593.98 1922.59 8/13/2008 8188.3 7714.85 473.45 11/3/2008 5889.34 7924.06-2034.72 3/23/2008 9215.94 7621.34 1594.6 6/3/2008 9501.92 7595.31 1906.61 8/16/2008 8331.63 7701.81 629.82 11/4/2008 6045.13 7909.88-1864.75 3/24/2008 9186.73 7623.99 1562.74 6/4/2008 9661.48 7580.79 2080.69 8/17/2008 8357.23 7699.48 657.75 11/5/2008 6083.87 7906.35-1822.48 3/25/2008 9313.24 7612.48 1700.76 6/7/2008 9765 7571.37 2193.63 8/18/2008 8411.4 7694.55 716.85 11/8/2008 5732.03 7938.37-2206.34 3/26/2008 9221.95 7620.79 1601.16 6/8/2008 9737.31 7573.89 2163.42 8/19/2008 8418.96 7693.86 725.1 11/9/2008 5836.42 7928.87-2092.45 3/29/2008 8992.26 7641.69 1350.57 6/9/2008 9777.04 7570.28 2206.76 8/20/2008 8463.71 7689.79 773.92 11/10/2008 5766.16 7935.27-2169.11 3/30/2008 8906.2 7649.52 1256.68 6/10/2008 9766.37 7571.25 2195.12 8/23/2008 8901.9 7649.91 1251.99 11/11/2008 5465.85 7962.59-2496.74 Total 498158.01 394586.86 103571.15 Total 501056.19 394323.2 106732.99 Total 469227.78 397219.55 72008.23 Total 363599.48 406831.71-43232.23 2/27/2008 10146.16 7536.69 2609.47 5/11/2008 9695.29 7577.71 2117.58 7/22/2008 9108.42 7631.12 1477.3 10/12/2008 5814.6 7930.86-2116.26 3/1/2008 10041.56 7546.2 2495.36 5/12/2008 9615.05 7585.02 2030.03 7/23/2008 9080.87 7633.63 1447.24 10/13/2008 6365.23 7880.75-1515.52 3/2/2008 9760.42 7571.79 2188.63 5/13/2008 9749.53 7572.78 2176.75 7/26/2008 9022.31 7638.96 1383.35 10/14/2008 6828.96 7838.55-1009.59 3/3/2008 9723.22 7575.17 2148.05 5/14/2008 9783.19 7569.72 2213.47 7/27/2008 8942.89 7646.18 1296.71 10/15/2008 6863.15 7835.44-972.29 3/4/2008 9902.52 7558.86 2343.66 5/17/2008 9664.54 7580.51 2084.03 7/28/2008 8805.45 7658.69 1146.76 10/18/2008 6503.94 7868.13-1364.19 3/5/2008 9871.9 7561.64 2310.26 5/18/2008 9646.44 7582.16 2064.28 7/29/2008 8773.05 7661.64 1111.41 10/19/2008 6258.32 7890.48-1632.16 3/8/2008 9797.84 7568.38 2229.46 5/19/2008 9630.65 7583.6 2047.05 7/30/2008 8740.74 7664.58 1076.16 10/20/2008 6345.75 7882.52-1536.77 3/9/2008 9698.13 7577.46 2120.67 5/20/2008 9673.25 7579.72 2093.53 8/2/2008 8633.5 7674.34 959.16 10/21/2008 6397.14 7877.85-1480.71 2/24/2008 10004.06 7549.62 2454.44 5/6/2008 9926.63 7556.66 2369.97 7/19/2008 9073.8 7634.27 1439.53 10/7/2008 6253.72 7890.9-1637.18 2/25/2008 10210.5 7530.83 2679.67 5/7/2008 9771.85 7570.75 2201.1 7/20/2008 9081.65 7633.56 1448.09 10/8/2008 6160.52 7899.38-1738.86 2/26/2008 10151.36 7536.21 2615.15 5/10/2008 9502.96 7595.22 1907.74 7/21/2008 9096.16 7632.24 1463.92 10/11/2008 5794.87 7932.65-2137.78 2/10/2008 8873.86 7652.46 1221.4 4/22/2008 9692.96 7577.93 2115.03 7/5/2008 9378.34 7606.56 1771.78 9/15/2008 7255.15 7799.77-544.62 2/11/2008 8818.43 7657.51 1160.92 4/23/2008 9754.1 7572.36 2181.74 7/6/2008 9483.23 7597.01 1886.22 9/16/2008 7216.71 7803.27-586.56 2/12/2008 9077.19 7633.96 1443.23 4/26/2008 9902.74 7558.84 2343.9 7/7/2008 9517.32 7593.91 1923.41 9/17/2008 7387.25 7787.75-400.5 2/13/2008 9107.06 7631.24 1475.82 4/27/2008 9766.27 7571.26 2195.01 7/8/2008 9293.45 7614.28 1679.17 9/20/2008 7586.68 7769.6-182.92 2/16/2008 9387.56 7605.72 1781.84 4/28/2008 9907.12 7558.44 2348.68 7/9/2008 8998.28 7641.14 1357.14 9/21/2008 7538.65 7773.97-235.32 2/17/2008 9490.05 7596.39 1893.66 4/29/2008 10089.52 7541.84 2547.68 7/12/2008 8995.07 7641.43 1353.64 9/22/2008 7461.14 7781.02-319.88 2/18/2008 9649.01 7581.93 2067.08 4/30/2008 10066.16 7543.97 2522.19 7/13/2008 9145.03 7627.79 1517.24 9/24/2008 7133.47 7810.84-677.37 2/19/2008 9740.29 7573.62 2166.67 5/3/2008 10057.69 7544.74 2512.95 7/14/2008 9099.2 7631.96 1467.24 9/27/2008 6993.13 7823.61-830.48 2/20/2008 9972.38 7552.5 2419.88 5/4/2008 10055.23 7544.96 2510.27 7/15/2008 8706.77 7667.67 1039.1 9/28/2008 7458.5 7781.26-322.76 2/23/2008 10194.21 7532.31 2661.9 5/5/2008 10030.62 7547.2 2483.42 7/16/2008 8861.24 7653.61 1207.63 10/6/2008 6726.6 7847.87-1121.27 274 1/30/2008 9559.87 7590.04 1969.83 4/13/2008 9562.23 7589.82 1972.41 6/24/2008 9731.8 7574.39 2157.41 9/6/2008 8044.79 7727.91 316.88 2/2/2008 9547.87 7591.13 1956.74 4/14/2008 9604.2 7586 2018.2 6/25/2008 9581.34 7588.08 1993.26 9/7/2008 7907.52 7740.4 167.12 2/3/2008 9565.39 7589.54 1975.85 4/15/2008 9522.93 7593.4 1929.53 6/28/2008 9313.4 7612.47 1700.93 9/8/2008 8245.21 7709.67 535.54 2/4/2008 9657.84 7581.12 2076.72 4/16/2008 9630.37 7583.62 2046.75 6/29/2008 9324.36 7611.47 1712.89 9/9/2008 8030.69 7729.19 301.5 2/5/2008 9659.91 7580.93 2078.98 4/19/2008 9497.16 7595.74 1901.42 6/30/2008 9352.32 7608.92 1743.4 9/10/2008 8128.1 7720.33 407.77 2/6/2008 9378.75 7606.52 1772.23 4/20/2008 9521.61 7593.52 1928.09 7/1/2008 9385.19 7605.93 1779.26 9/13/2008 7802.25 7749.98 52.27 2/9/2008 9054.7 7636.01 1418.69 4/21/2008 9638.79 7582.86 2055.93 7/2/2008 9467.68 7598.43 1869.25 9/14/2008 7759.07 7753.91 5.16 Date Actual Expected Date Actual Expected Date Actual Expected Date Actual Expected 1/19/2008 11291.69 7432.44 3859.25 3/31/2008 8992.53 7641.67 1350.86 6/11/2008 9688.45 7578.34 2110.11 8/24/2008 8899.27 7650.15 1249.12 1/20/2008 10453.69 7508.7 2944.99 4/1/2008 8980.55 7642.76 1337.79 6/14/2008 9708.78 7576.49 2132.29 8/25/2008 8933.79 7647.01 1286.78 1/21/2008 10170.81 7534.44 2636.37 4/2/2008 9181.21 7624.5 1556.71 6/15/2008 9687.09 7578.46 2108.63 8/26/2008 8981.99 7642.62 1339.37 1/22/2008 9193.86 7623.34 1570.52 4/5/2008 9408.81 7603.78 1805.03 6/16/2008 9782.19 7569.81 2212.38 8/27/2008 8898.97 7650.18 1248.79 1/23/2008 9203.56 7622.46 1581.1 4/6/2008 9307.06 7613.04 1694.02 6/17/2008 9814.94 7566.83 2248.11 8/30/2008 8713.87 7667.02 1046.85 1/26/2008 9277.16 7615.76 1661.4 4/7/2008 9410.18 7603.66 1806.52 6/18/2008 9778.48 7570.14 2208.34 8/31/2008 8757.04 7663.1 1093.94 1/27/2008 9621.17 7584.46 2036.71 4/8/2008 9423.58 7602.44 1821.14 6/21/2008 9768.54 7571.05 2197.49 9/1/2008 8751.87 7663.57 1088.3 1/28/2008 9240.65 7619.09 1621.56 4/9/2008 9501.72 7595.33 1906.39 6/22/2008 9801.99 7568 2233.99 9/2/2008 8590.37 7678.26 912.11 1/29/2008 9377.72 7606.61 1771.11 4/12/2008 9552.63 7590.7 1961.93 6/23/2008 9789.91 7569.1 2220.81 9/3/2008 8504.72 7686.06 818.66 P6 (1/19/2008-3/30/2008) P7 (3/31/2008-6/10/2008) P8 (6/11/2008-8/23/2008) P9 (8/24/2008-11/11/2008) After Tadawul

A. T-Statistics Results: T-statistics results Test Value = 0 Data set Mean 95% Confidence Interval of the Difference t df Sig. (2-tailed) Difference Lower Upper P1 -.047 51.963-4.41365-193.0428 184.2155 P2 -.149 51.882-9.75231-140.7672 121.2626 P3-14.415 51.000-501.69769-571.5693-431.8261 P4 7.128 51.000 176.05654 126.4731 225.6400 P5 16.183 51.000 2592.39692 2270.8003 2913.9936 P6 29.129 51.000 1991.75288 1854.4793 2129.0265 P7 57.807 51.000 2052.55750 1981.2746 2123.8404 P8 16.939 51.000 1384.77365 1220.6503 1548.8970 P9-4.779 51.000-831.38904-1180.6619-482.1162 Table 5: T-statistics test results A. Correlation Results: correlations Data set Lag Correlation Std. Error a Box-Ljung Statistic Value df Sig. b P1 1.954.135 50.110 1.000 P2 1.864.135 41.120 1.000 P3 1.907.135 45.260 1.000 P4 1.824.135 37.339 1.000 P5 1.950.135 49.699 1.000 P6 1.693.135 26.461 1.000 P7 1.828.135 37.722 1.000 P8 1.950.135 49.734 1.000 P9 1.928.135 47.418 1.000 a. The underlying process assumed is independence (white noise). b. Based on the asymptotic chi-square approximation. Table 6: Correlation test results 275

A. Findings: The results are in favor of the efficiency theory. It can be suggested based on the stated results that the SSM has become informationally more efficient after the introduction of the Tadawul however; this informationally efficiency is decelerated by the slow reaction of investors. Based on the liner regression equations, the Cumulative Expected Returns (CAR) vary significantly from period to another (P1: 867.71, P2: -507.12, P3: -26088.28, P4: 9154.94, P5: 134804.64, P6: 103571.15, P7: 106732.99, P8: 72008.23, P9: -43232.23). My findings advocate Fama argument that analysis of the split between underreaction and overreaction is consistent with the efficiency hypothesis. The results of the t-statistics (shown in table 5) indicate a significant difference between the mean of the data sets taken at different periods of time which is coherent with the efficiency theory. The observed means were (P1: -0.047, P2:-0.149, P3: -14.415, P4: 7.128, P5: 16.183, P6: 29.129, P7: 57.807, P8: 16.939, P9: -4.779). On the other hand, the slow adjustment to market information assumption also holds valid as a behavioral impact imposed on the market. Table 6 shows a fluctuation in the correlation of changes of returns over time suggesting a slow reaction to news by investors in the SSM. The correlation values (P1: 0.954, P2: 0.864, P3: 0.907, P4: 0.824, P5: 0.95, P6: 0.693, P7: 0.828, P8: 0.95, P9: 0928). 5. Conclusion The SSM has become informationally more efficient after the formation of Tadawul. The results support Fama anomalies split assumption and the slow adjustment to market information phenomena. In summary the SSM has a unique efficiency characteristic. First, it has emerged to become more efficient after the formation of Tadawul. Second, its efficiency can be observed clearly via anomalies split. Third, this efficiency is slowed down by the investors reaction to market information. References 1. Fama, E. F. (1998) Market efficiency, Long-term returns, and Behavioral finance Journal of Financial Economics 49(3):283-306 2. Hokroh, M. A. (2013) An Application of the Weak Form of the Efficiency Hypothesis on the Saudi Arabia Stock Market after Tadawul Asian Journal of Finance and Accounting, 5(1), 382-395 276